The popularity of digital ID wallets worldwide is on the rise. A new study from Juniper Research reveals that the global use of digital identity apps will reach over 4.1 billion by 2027, compared to 2.3 billion in 2023. That’s a remarkable 82% growth in just four years. What’s driving it?
More services are moving online, governmental support for digital identity solutions is growing, and traditional methods of identity verification are becoming simply inconvenient. So, it’s no surprise that the need for secure and efficient digital identification solutions has never been stronger. In fact, it’s predicted that government-backed digital IDs might soon replace traditional physical documents.
For example, the EU is planning to launch the EU Digital Identity Wallet (EUDI Wallet) through the eIDAS 2 framework, making cross-border e-ID a reality. Several countries already utilize digital ID wallets, which raises important questions: What exactly is a digital ID wallet? How does it work, and what benefits can it offer?
Digital ID wallet: What is it?
You’re likely familiar with digital wallets like Apple Pay, Google Pay, or PayPal mobile app, where you can store payment credentials. These have been around for quite some time now. Building on this concept, digital ID wallets enable you to add the storage of verified personal and identity data to the wallet.
Since there isn’t a standardized framework yet, the specific content and functionalities of digital ID wallets can vary. Still, they act as a secure container for verified digital documents and credentials. These might include your personal details (name, date of birth, national identification number, citizenship, and visas), financial details (tax number and insurance), and other documents (driver’s licenses, passports, medical records or professional certificates, issued by government authorities or trusted institutions).
What does a digital ID wallet do?
It can be used for verifying your identity online and in person for tasks like:
- accessing government services;
- signing documents;
- proving your age or citizenship;
- authorizing payments;
- renting a car or a hotel room;
- claiming benefits;
- verifying your education credentials.
Digital ID wallets might exist as standalone applications or be integrated within existing secure mobile environments, like smartphone operating systems. They offer better security and more control over sharing your verified credentials. That’s why they’re gaining popularity worldwide, providing greater convenience, security, and inclusivity. With digital ID wallets, you can easily access and share your personal info without carrying physical copies.
How do digital ID wallets work?
Digital ID wallets work much like physical wallets but with an extra layer of security. While a physical wallet holds physical cards and money, a digital ID wallet doesn’t store its contents within the wallet itself. Instead, they’re stored on a server or blockchain for protection. In fact, your digital identity wallet only contains a private key, generated when you create your account.
A private key, like a password, is a secret number used in cryptography. It’s exclusive to you and allows you to share and verify data associated with your wallet. Since this key grants access to your documents and private data, it should only be shared with the key’s creator or authorized parties capable of decrypting the data.
Digital ID wallets offer a secure way to store and share verified digital credentials, but there are two main approaches to their architecture: centralized or decentralized. Let’s delve into each:
Centralized wallets, like those managed by local governments or tech giants such as Apple or Google, operate similarly to widely used digital services. They’re convenient because the third party holds your data, offering a way to recover your user account if you forget your credentials. However, they’re also more vulnerable to attacks and misuse since accessing one account grants access to all data.
Decentralized wallets, gaining popularity with blockchain technology, offer enhanced security by eliminating the need for a third party. Instead of being stored on a single server, data is distributed across a blockchain, known as decentralized identity (DID). This distributed structure makes it challenging for unauthorized access and provides users with more control over their data. With DIDs, data is more secure, less prone to loss or corruption, and offers users greater flexibility in data management.
Digital ID wallets already in use: The situation around the world
Governments worldwide are embracing digital ID wallets, empowering citizens with secure and immediate access to their personal information. Successful local initiatives are paving the way for broader adoption, as more countries acknowledge the potential of these wallets to transform how individuals manage and control their data. A study by McKinsey Global Institute estimates that implementing an efficient digital ID system could unlock economic benefits equivalent to 3 to 6% of a country’s GDP by 2030. Here are just a few examples of effective digital ID wallet implementation.
Denmark: MitID
Denmark ranks among the top countries globally for digitizing its public sector. The Danish national eID, known as MitID, serves as every resident’s digital passkey to access online services, spanning both governmental and private sectors. MitID is the outcome of a strong and distinctive partnership between the government and banks, serving as a joint solution for businesses, individuals, and authorities alike.
Today, over 90% of the population relies on their national eID for electronically proving their identity in situations where it’s crucial. With MitID, citizens can access public services round the clock. In the public sector, MitID is indispensable for various tasks such as updating addresses, applying for childcare, accessing tax information, selecting a healthcare provider, checking Digital Post, or even managing affairs when leaving Denmark.
Estonia: eID
Estonia is yet another country widely recognized in digital identity (eID) solutions. Their eID system, known as ID-kaart, serves as a mandatory national identity card for citizens. It’s been in use for over 20 years and has become the cornerstone of the country’s e-state. It acts as both legal identification and a digital signature tool, granting secure access to various online services like e-voting, healthcare records, banking, and much more.
Estonia’s eID system is impressive, with nearly the entire population (99%) holding a digital ID and exceeding 1 billion digital signatures performed, showcasing its widespread use and secure functionality.
Netherlands: DigiD and eHerkenning
In the Netherlands, they’ve adopted a dual approach to digital identification with two main systems: DigiD and eHerkenning. DigiD, short for Digital Identification, serves citizens by providing seamless interaction with government agencies, much like a digital passport. Each user gets a unique number, along with a username, password, and various security measures for safe access to sensitive data. It facilitates tasks like tax filing, benefit applications, and checking pension or health insurance statuses.
eHerkenning, on the other hand, targets organizations, bridging public and private services. It enables businesses to offer secure online services and conduct thorough identity verification. The DigiD app is used by more than 15 million citizens, while eHerkenning boasts 500 service providers and 13.3 million logins annually.
Sweden: Digital ID card in BankID
Sweden relies on the BankID system for digital identification. It works like a digital passport or driver’s license, allowing for different online tasks such as opening bank accounts or filing taxes. As of 2023, over 8.5 million Swedes use BankID, making it one of the most successful digital identity solutions in the world.
BankID uses strong authentication methods. For example, the mobile BankID requires a PIN and fingerprint or face recognition to ensure the security of user data and prevent unauthorized access. There are strict data privacy regulations in Sweden, and BankID adheres to them, ensuring user control over their personal information stored within the system.
Sweden is also constantly exploring ways to improve and expand the functionalities of BankID, with potential future applications in areas like e-voting and healthcare access.
Poland: mObywatel
The mObywatel app acts as a citizen’s assistant, catalog of ready-to-use e-services, and wallet for digital documents. It has already been downloaded over 15 million times. mObywatel offers citizens a convenient way to present their identity documents in real-life situations. The app may include different types of documents such as ID cards, driver’s licenses, school and student ID cards, Large Family cards, car details, and much more.
It’s handy for various occasions like train rides, police checks, getting loyalty cards, collecting packages, and even voting. However, it has some restrictions. It can’t be used where the law mandates showing an ID card or passport, like at banks and airports, or when registering a SIM card, which is compulsory in Poland.
Singapore: National Digital Identity (NDI) system—Singpass
Singapore has implemented a centralized digital identity system called Singpass, led by the government. This wallet allows citizens to access various services from both the public and private sectors. These include applying for public housing, managing insurance policies, and conducting online banking. Users can log in to various digital services effortlessly and securely through the Singpass app.
They can log in by using their fingerprint, faci